Enable Midstream Partners LP (NYSE: ENBL) agreed on Oct. 23 to acquire Velocity Midstream, a private crude oil and condensate gathering and transportation company in the Anadarko Basin’s Scoop and Merge plays, as Enable pivots toward liquids.

Oklahoma City-based Enable will acquire Velocity Holdings LLC, based in Tulsa, Okla., for $442 million. The company said it doesn’t expect to raise common equity to finance the acquisition.

Concurrently with the acquisition, Enable also announced on Oct. 23 a crude oil and water acreage dedication in the Williston Basin driven by “significant” activity in the Bakken play.

Analysts with Tudor, Pickering, Holt & Co. (TPH) said the concurrent announcements by Enable doubles down on the company’s strategic pivot to liquids.

“Combined Velocity and Bakken investments signal commitment to expanding Enable liquids exposure though ambiguity on throughput assumptions and capital needs likely tempers market enthusiasm ahead of updated outlook on third-quarter 2018 earnings call,” TPH analysts said in a research note on Oct. 24.

Together, Enable said the two crude business expansions in the Anadarko and Williston basins are expected to generate a 2019 total capital invested to adjusted EBITDA multiple of roughly 13 times, working down to below a 10-times multiple by 2020.

Additionally, the company anticipates the business expansions to be accretive to distributable cash flow per unit starting in 2019, according to the Enable press release.

“The combination of the Velocity acquisition and the expansion of our Williston Basin assets increases the scale and contribution of our crude and water businesses, providing for fee-based growth as producers continue to target crude oil production,” Rod Sailor, president and CEO of Enable, said in a statement.

In particular, Sailor said the Velocity acquisition builds on Enable’s Anadarko Basin midstream platform to offer customers complete wellhead-to-market solutions for both natural gas and crude.

The Velocity crude and condensate system is comprised of about 150 miles of pipeline capable of flowing about 225,000 barrels per day (bbl/d). The Velocity assets also include more than 400,000 barrels of owned and leased storage and 26 truck bays capable of unloading more than 100,000 bbl/d.

Velocity’s operations are backed by large area dedications and long-term, fee-based contracts with over 2 million acres dedicated from shippers, including acreage dedications from top Scoop and Merge producers, which include Continental Resources Inc. (NYSE: CLR), according to TPH analysts.

Enable will also acquire Velocity’s 60% interest in a 26-mile pipeline system joint venture (JV) with CVR Refining LP (NYSE: CVRR). The JV connects Scoop production from the Velocity system to the CVR-owned and operated Wynnewood refinery.

The TPH analysts noted that the Velocity acquisition will add crude oil to the Midcon value chain for Enable.

Enable owns, operates and develops natural gas and crude oil infrastructure assets in the U.S. in the Anadarko, Ark-La-Tex, Arkoma and Williston basins. The company’s assets include natural gas and crude oil gathering pipelines, including interstate and intrastate lines, as well as storage facilities.

In the Williston Basin, Enable plans to further expand its existing crude oil and water gathering systems to support volumes from more than 90,000 gross acres dedicated to Enable in North Dakota’s Dunn and McKenzie counties under long-term, fee-based agreements.

Enable said the new commitments are driven by significant producer activity and a backlog of drilled but uncompleted wells (DUCs) from the dedicated acreage.

The potential expansion would more than double editing Williston crude capacity, the TPH analysts said.

Subject to future drilling plans, Enable will add up to 72,000 bbl/d of crude oil gathering design capacity, increasing total Williston Basin crude gathering capacity to up to roughly 130,000 bbl/d, according to the company release.

Enable expects to start gathering volumes associated with these system expansions in first-half 2019, including volumes from DUCs.

For the Velocity acquisition, Enable said it received early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act on Oct. 19 and expects to close the transaction around Nov. 1, following the satisfaction of remaining pre-closing conditions.

Law firm Gibson, Dunn & Crutcher LLP represented Enable in the Velocity acquisition.

Emily Patsy can be reached at epatsy@hartenergy.com.

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